Category Archives: Banks

The Case for Credit Unions

BankI used to use a bank until I was in college. My university was a member of a statewide credit union, and, with that, I was eligible to become a member of it as well. Since then, I haven’t looked back. A lot of people are curious as to which financial institution they should put their money in; we’re going to look at that a bit today.

Let’s define things and then talk about how they’re different. First up, banks.

Bank-  “an organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor’s checks; and issues drafts and cashier’s checks.”

Credit union- “non-profit financial institution that is owned and operated entirely by its members. Credit unions provide financial services for their members, including savings and lending. Large organizations and companies may organize credit unions for their members and employees, respectively. To join a credit union, a person must ordinarily belong to a participating organization, such as a college alumni association or labor union. When a person deposits money in a credit union, he/she becomes a member of the union because the deposit is considered partial ownership in the credit union.” (Definitions provided by investorwords.com)

There’s something I want you to see in the definition of a credit union that is vital for understanding the differences between the two: non-profit. Credit unions are not out for themselves; they don’t consider the people who they serve as customers; instead, they’re members of the union. In order to be part of a credit union, you have to be a part of whatever they serve. Some are community based, like mine. Others are based on unions, organizations (like the one for my university) and other common groups of people.

Banks have an issue with credit unions, claiming they have an “unfair advantage” and that they take business away from them. Most credit unions offer more fair rates, less fees, and more personalization than banks.  Since the Credit Union Act of 1934, banks have lobbied to the government for the credit unions to be restricted or eliminated, to no avail.

Credit unions were at a disadvantage to banks because they didn’t offer as many services as their counterparts.  Recently, many credit unions have begun to offer more services that help them to compete with banks more readily. Banks usually are more apt to offer credit cards, because of the costs involved. Banks have more revenue, because of being for-profit, so credit cards and other things that have a higher start-up cost may be more readily available at banks than credit unions.

The locality that credit unions offer is both an advantage and disadvantage, so if you are someone who travels a lot, you may want to consider a bank with a national chain instead. Some credit unions have decided to thwart this a bit by offering to credit a certain amount of ATM fees a month. Also, many convenience stores (Sheetz, Wawa) now offer surcharge-free ATMs. These two things help thwart the costs that used to accrue because of the locality.

Which should you get? As you can probably tell by this post, I’m a fan of credit unions. But, make sure to check out the credit  unions and banks in your area to make sure that you’re putting your money where it will grow and be safe and secure. Have a great week!

 

Some Problems with my Money Market Account

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It looks like my money market account’s interest is finally stabilizating at 4.50%, which is .4% lower than the last time I had mentioned my money market account which is over at gmacbank. Which is okay with me, not like I’m happy that it went down but the amount of money in my account right now doesn’t make any significance difference losing that .4%. Losing the interest rates is all handy and dandy but today I encounter something that was more of a worry than just losing some interest rates.

For the most part, I try to stay away from checking my investment accounts as much as possible because then I would not be inclined to touch or do anything with the account but yesterday I checked my account and I’m glad that I did. As I was going over my account summary, I realized that there has not been to much activity going on in the account. Thats mainly because I haven’t been putting any thing into my account, so the only thing in my statement was my interest rates that were credit into my account for the past 4 months. While looking over the statement, it made me realize that I was actually making some decent money and I thought to myself, “wow, I’m glad that I had started this account a while back. Look at all this interest it’s making and how much I would have been missing out on”. But thats when I realized and said, “wait a minute, these numbers don’t seem to be adding up right”. Then after careful review of the account summary, I was right, they weren’t adding up right. Each month was credited some money from the interest rate but was not the full amount that month had earned.

Now what I am to think. There has got to be an explanation right? I mean, gmac bank is a pretty big online banking firm and I doubt that they’re trying to cheat me out of my money so I decided to give them a friendly call to see what the problem was. Maybe it was some kind of a monthly fee I didn’t know about?

So I called them up and this woman answers. The conversation was pretty quick, after giving her all my account info and my security questions, the conversation went something like this:

Me:” So I was looking over my account summary for my money market account and noticed that my interest rates weren’t adding up, whats the issue here”?

Gmac representative: “Okay, let me take a look at it.”

(Silence and some keyboard tapping noises…)

Gmac representative:”Hmmm…this is pretty interesting. I’m not exactly sure what’s going on here. Let me take out a calculator to verify that they’re not adding up.”

now I’m thinking…wow. Its an obvious miscalculation, I mean you can look at the credited number and see that it doesn’t add up ( kinda like you know 1+1 is not going to be a two digit number)

me:” …ok”.

(more silence and some calculator tapping noises…)

Gmac representative:”wow, you’re right. It doesn’t add up. I’m really not sure what’s going on here.”

Me:”So it’s not any kind of fees that maybe you’re deducting each month?”

Gmac representative:”No, when we deduct fees, we list them as such. What we’ll have to do is put in an investigation ticket in and someone from the department will contact you within 2-3 business days”.

Me:”…oh…ok”.

Gmac representative:” Is there anything else I can help you with”?

Me:” No”

So that was pretty surprising. I mean, even if the interest rates don’t add up to that much, its the trust thats the issue here. Whether it’s two dollars or two hundred dollars, money is money. I’m not sure what would have happened if I didn’t call them about this issue. How long would it have taken until it was fixed or would it ever have gotten fixed? I’m not so sure.

I’m curious, has anyone else experience anything like this before? Maybe you might want to check your investment accounts and see if your interests are adding up.

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GMAC Bank

gmac.jpgToday I just opened up a Money Market Savings account with GMAC Bank. It’s great because it’s just like a checkings account with a super high interest rate. I mean why not make some interest while my money sits in my checkings account right? So my plan is to make this new account my primary checkings account and also as well as my savings account.

Here are some Benefits of the account:

  • The interest rate for this money market account is currently going for 5.30 %, which is fairly high.
  • The minimum opening deposit is only $50.00
  • FDIC-insured up to $100,000
  • I get my atm fees reimbursed up to $6.00.
  • Just like a checkings account, I get a check card and a check book.
  • No monthly fee as long as the monthly average balance is over $500.00.
  • Interests are compounded daily.

Some of the negatives:

  • It’s an online banking firm so that means I can’t go into a physical branch for assistance.
  • I’m limited to only 6 electronic transactions per statement cycle (ATM withdraws and electronic transfers.
  • Along with many other money market accounts, the interest rates are not fixed.

Those are the main negatives I can think of at the top of my head. If you know of any other, please feel free to comment.

So I’m really excited about this account. It’s neat to think that I can move all my money from my checkings account and savings account and now make interest on it. My old savings account was going for something like %1 – %2 percent so its an upgrade from it. For my first deposit amount, I tranfered $1,000 from my savings account to this account and eventually I will move all my money from checkings and savings to here. I’m hoping to have $5,000 – $6,000 in this account by the end of the summer.